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MichUHCAN E-Mail Newsletter for July, 2001

Prescription for Profit

by Marcia Angell and Arnold S. Relman
[Excerpted from The Washington Post, June 20, 2001]

Few Americans appreciate the full scope and consequences of the pharmaceutical industry's hold on our health care system. Prescription drug costs are rising at an unsustainable rate-19% per year-and will soon exceed payments to doctors as the largest health expense after hospital costs. The drug companies maintain that this is the price of success. They portray their industry as a highly risky one in a competitive market-just able to cover its enormous research and development costs but managing nonetheless to deliver a stream of innovative drugs in the public interest.

Here are the facts. The pharmaceutical giants spend two or three times as much on marketing and administration as they do on R&D, and their profits are about twice their R&D costs. To cite a typical example, last year GlaxoSmithKline spent 37 percent of its revenues on marketing and administration and only 14 percent on R&D, while making a 28 percent profit. Overall, the pharmaceutical industry is by far the most profitable in the United States.

As for being innovative: Yes, the industry has brought important new drugs to market over the past few decades, but many of them stemmed from basic research at the National Institutes of Health or in academic laboratories supported by the NIH. Others were first developed by smaller biotech companies and then licensed to the large companies. It was recently reported that only two of Bristol-Myers Squibb's top 10 drugs were discovered in-house. Moreover, the number of innovative drugs reaching the market has actually declined in the past five years.

The pharmaceutical giants are now putting a major part of their resources into the development and marketing of "me-too" drugs-variants of drugs already on the market. Among many examples, Claritin is one of a number of similar antihistamines; Zoloft is like many other antidepressants; and Zocor is just one of a family of cholesterol-lowering drugs. "Me-too" drugs are relatively easy to develop but require massive promotion campaigns to attract consumers to a particular brand and persuade physicians to prescribe one instead of another. Hence, the huge marketing budgets.

Patent Protection

Most important, the drugs enjoy l7-year (or longer) patent protection. Once a drug is patented and given a brand name, no one else may sell it, and the company is free to charge whatever the market will bear without fear of competition from generics. No wonder drug companies fight to extend the life of their patents and to obtain new patents for old drugs. That can be done merely by proposing a new use or a different dosage form, or by combining two old drugs into a single new pill. The anti-diabetes drug Glucophage XR, for example, is Bristol-Myers Squibb's newly patented once-daily replacement for the twice-daily Glucophage, whose patent expired last fall.

The drug companies devote enormous sums to promoting their interests. They have the largest lobby in Washington, and contribute copiously to political campaigns. Half the FDA's budget for the evaluation of new drugs now comes from drug company users' fees, making the agency dependent on the industry it regulates-an obvious conflict of interest. The industry also spends lavishly to influence doctors, who write the prescriptions, and medical researchers, who test the drugs.

A Hard Look

It's time to take a hard look at the pharmaceutical industry and hold it accountable. This is particularly urgent now, given the move to add a drug benefit to Medicare. The industry would like to see such a benefit without any new regulation, but that would cause drug prices to rise even faster and hand the companies yet another windfall. Future policy on this and other matters related to prescription drugs should be based on a thorough understanding of the industry's behavior, best achieved through in-depth congressional hearings. We can't think of a more urgent investigative assignment for the Senate Committee on Health, Education, Labor and Pensions.

[Marcia Angell is a senior lecturer and Arnold S. Relman is professor emeritus at Harvard Medical School. Both are former editors-in-chief of the New England Journal of Medicine.]

New State Drug Plan for Seniors

This October will see the start of Michigan's new prescription drug plan for people aged 65 or older: the Elder Prescription Insurance Coverage (EPIC) Program. To qualify, seniors must have household income below $16,700, single person, or $22,500 for a couple; and they must not be receiving Medicaid. EPIC, which replaces existing programs for low-income seniors, will require 20% co-payments, up to a monthly cap. The state Department of Consumer and Industry Services is to register seniors in the program.

Cook globally...

Help MichUHCAN members prepare foods representing the countries with a universal, national health program. For more information see notice, this mailing, or phone Marylyn (248-674-3520).

... eat locally.

For a small donation, attend our International Buffet, October 13 at UAW Local 417 in Troy. Watch this newsletter for ticket information.

MichUHCAN Detroit Meeting:

Thursday July 19, 7:30 pm.

Place: First United Methodist Church of Berkley, 12 Mile Road, two blocks west of Coolidge; park in the lot on the west side, enter from Kipling, east side

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Bush Drug Discount Card: A "Bait and Switch" Con Game

"The drug discount card proposed by President George W. Bush really amounts to little more than a 'bait and switch' con game and is intended to divert attention from the need for a real prescription drug benefit under Medicare," warns Edward F. Coyle, Executive Director of the 2-1/2 million-member Alliance for Retired Americans. According to Coyle, "A drug discount card is not a substitute for a Medicare prescription drug benefit and does not even come close to solving the problem of millions of retired and disabled people unable to afford the medications they need."

Coyle points out that "the high prices older and disabled Americans must pay for their medications is the result of price gouging by the pharmaceutical industry - not the neighborhood pharmacy. But, under the President's proposal, the burden would be placed on seniors and pharmacies to lower prices. The main beneficiary of a drug discount card would be the drug industry - already the nation's most profitable industry.

"In exchange for the card, the President wants Medicare beneficiaries to give up their Medicare hospital and doctor bill coverage and join HMOs and other private insurance plans. Once under the thumb of the HMOs and insurance companies, beneficiaries would see their benefits reduced and their out-of-pocket expenses increased. Shifting money from Medicare to HMOs and insurance companies would make it harder for Medicare to maintain its current level of benefits, which is already barely adequate. The end result: Medicare would be phased out, leaving the retired and disabled completely at the mercy of HMOs and the insurance industry.

"Polls show that Americans of all ages strongly support the Medicare program and want it updated by adding a prescription drug benefit. The Alliance for Retired Americans urges the President to stop listening only to the drug industry and listen to what the American people want.

Alfred & Naomi E. Shaiken
100 Wells Street Apt. 902
Hartford Ct. 06103

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Lies About Social Security

by Mark Weisbrot

Can the Bush Administration actually get away with privatizing and cutting the nation's most successful government program? Social Security provides support to 45 million people -- nearly one out of six Americans. It keeps half of the nation's elderly above the poverty line. For these reasons it was long considered politically untouchable. Yet we are currently in the midst of a prolonged campaign to partially privatize the system and reduce its benefits.

The outcome will depend quite a bit on how much the "reformers" -- which include powerful Wall Street financial interests -- can get away with lying about Social Security.

"The threat to the stability of Social Security has been apparent for decades . . . " said President Bush last month. "We can postpone action no longer. Social Security is a challenge now; if we fail to act, it will become a crisis."

It so happens that Social Security is financially in better shape than it has been for most of its 65-year history, including the 1940s, 50s, 60s, and 70s. But you would never know that from reading the newspapers.

The only "threat to the stability of Social Security" comes from the "President's Commission to Strengthen Social Security." Who are they kidding with that name? They fully intend to slice off a chunk of Social Security's revenue for private individual accounts, and then cut benefits to make up for the shortfall. These guys could make Orwell blush.

According to the numbers that President Bush and everyone else in the debate is relying upon, Social Security will be able to pay all promised benefits for the next 37 years, without any changes whatsoever. And there is no "crisis" involved in extending the program's benefits for the whole 75-year planning period: the shortfall is less than three-fourths of one percent of our national income.

If it were only President Bush saying these things about Social Security, they could be dismissed as merely an effort to promote privatization. But many journalists share his confusion on the subject.

The Washington Post reported in a news article last week that Social Security "is predicted to start becoming financially unstable in the middle of the next decade." Financially unstable? According the latest Social Security Trustees' report, in 2015 the program will have income of $868.5 billion, and expenses of $678.4 billion, giving it an annual surplus of $190.1 billion. The accumulated Trust Fund will have $3.1 trillion dollars. (These figures are in 2001, inflation-adjusted dollars).

Again, none of the members of the President's Commission would dispute these numbers. Instead, they try to fool the public and the press with the equivalent of one half of a baseball score. As in "the Orioles had a bad game: they only scored two runs." Without telling you that the other team didn't score any.

Take Richard Parsons, Chief Operating Officer of AOL Time-Warner and co-chair of the President's Commission. "When you have two workers for every retired person, it can't work; do the math," he says, referring to the Trustees' projections for 30 years from now. Well, the actuaries at Social Security have done the math, and it works just fine. The system may eventually need a bit more revenue, because people will be living longer. But it will be a very small amount relative to the nation's future income.

There is every reason to believe that people who are living longer, and earning 40 or 50 percent more (adjusted for inflation) than we do today would be willing to spend an additional one or two percent of their income, in order to support a longer retirement. They have always been willing to do this in the past. But even if they weren't, there is hardly any reason to be worrying about it now.

And very few people would be worried about Social Security if they had any idea what the numbers looked like. But most people don't: in fact, as a result of a highly successful disinformation campaign, they do not even believe they will see their promised benefits. Ironically, if the President's Commission were to have its way, this could come true.

In about six and a half years the first baby boomers will begin to retire, and there will be no noticeable impact on Social Security or on the federal budget. Perhaps then it will finally be obvious that this whole story about Social Security's financial troubles was nothing more than an urban legend.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. (www.cepr.net), and co-author, with Dean Baker, of Social Security: the Phony Crisis (2000, University of Chicago Press).


This article appeared on Common Dreams NewsCenter. Common Dreams NewsCenter is a non-profit news service providing breaking news and views for the Progressive Community.

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